SCE&G withdraws petition to scrap Summer project

16 August 2017

South Carolina Electric & Gas (SCG&E) has decided to withdraw its petition seeking permission from state regulators to abandon construction of two AP1000 reactors at its VC Summer plant. The move, the company said, would allow government officials to complete reviews of the project.

The construction site of the two AP1000 units at Summer, pictured in January(Image: SCE&G)

On 31 July, Scana Corporation subsidiary SCG&E announced its decision to cease construction of two units. The announcement followed co-owner Santee Cooper's decision to suspend construction because of projected completion delays and cost overruns.

Scana filed a petition with the South Carolina Public Service Commission (PSC) the following day seeking approval of its abandonment plan. In accordance with the Base Load Review Act, Scana is seeking an amortisation of the project costs and a return at the weighted average cost of capital on the unamortised balance until fully recovered. It plans to use the anticipated proceeds from the Toshiba settlement and benefits derived from tax deductions to mitigate rate increases and lessen the impact on its customers for several years.

SCE&G announced yesterday that it has decided to "voluntarily withdraw" its abandonment petition.

In a statement, the company said: "Over the past two weeks, SCE&G management has met with various stakeholders and members of the South Carolina General Assembly, including legislative leaders, to discuss the abandonment of the new nuclear project and to hear their concerns." SCE&G said its decision to withdraw the abandonment petition was "in response to those concerns, and to allow for adequate time for governmental officials to conduct their reviews."

Scana chairman and CEO Kevin Marsh said, "The purpose of these ongoing meetings is to discuss their concerns and to explain the path that led us to the abandonment decision." However, he stressed, "In our discussions with the legislature, we have not changed our position on abandonment."

He said both bodies of the General Assembly have formed committees to review the project, including the impacts on SCE&G and Santee Cooper customers, as well as the regulatory oversight provided throughout the process.

"While ceasing construction was always our least desired option, based on the impact of the bankruptcy of Westinghouse on our fixed price construction contract, the results of our evaluation of the cost and time to complete the project, and Santee Cooper's decision to suspend construction, abandonment was the prudent decision," Marsh said.

During a press conference today, Marsh said the withdrawal of the petition is seen as temporary and that it will be refiled with the PSC "at an appropriate time" once the reviews are complete.

"We recognise that this process creates some uncertainty regarding the timing and impact of our abandonment decision," he noted.

Regarding the possibility of restarting the project, Marsh said, "For us to restart the project, number one we will have to have a willing partner ... We would have to start with drafting a new partnership agreement to determine who would own what percentage of the project going forward." He said the partners would have to determine whether just one or both of the units will be completed. "At that point we would have to negotiate a construction contract with the contractor, whether that be Fluor or someone else. We would also have to re-engage Westinghouse in a services agreement because the plant is their design and we would need their design engineering support if we were to go forward.

"Once all that was accomplished, we would have to go back to the Public Service Commission and have them review the project and agree to the reconstitution of a plan to go forward."

He said this whole process could take about a year. "It's not something that would happen overnight. There would be significant negotiations to pull a project team back together. And once you've done that, you would then have assemble the construction team and oversight team back on site."

Marsh said the question of whether the new units would still qualify for production tax credits would still need to be addressed, but noted "that continues to be pursued at the legislative level and in Washington".

Construction began on the first of four AP1000 reactors in the USA - Summer unit 2 and Vogtle unit 3 in Georgia - in March 2013, with work beginning on Summer 3 and Vogtle 4 in November of that year.

Toshiba Corporation agreed on 27 July to pay a maximum of $2.168 billion to SCE&G and Santee Cooper under its guarantee obligations for the two AP1000 reactors under construction at Summer. Of this amount, $1.192 billion will go to SCE&G for its 55% ownership of the project, with $976 million to Santee Cooper, which owns 45%. The Japanese company's obligations as the former parent company of Westinghouse are payable regardless of whether or not either or both units are completed, or the project is abandoned.

The parental guarantee obligation was put in place by Toshiba and Summer's owners in 2008, when the engineering, procurement and construction contract for the two AP1000 units was placed with Westinghouse. Westinghouse filed for Chapter 11 bankruptcy in March of this year.

In June, Toshiba reached a similar agreement with the owners of the two AP1000s under construction at Vogtle in Georgia, with a cap of $3.68 billion for that project.